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Report: Tesla Motors Inc (TSLA) To Build $9 Billion Factory In China

Tesla Motors Inc (NASDAQ:TSLA) Model 3

Tesla Motors Inc is reportedly building a massive factory in China to boost the production of its electric vehicles. China is an important market for the U.S. car marker, which will form a joint venture with Jinqiao Group to setup its production facilities in Shanghai, Bloomberg reported, citing people familiar with the matter. The partnership will invest about $9 billion on building facilities in the country’s biggest city and a global financial hub.

According to the report, Tesla inked a non-binding memorandum of understanding with Shanghai government-owned Jinqiao to build its production facilities in the municipality. Each partner will invest invest about $4.5 billion, according to an unnamed person who wanted not to be disclosed.

Tesla Motors Inc (NASDAQ:TSLA) Model 3
Source: Tesla Motors Inc

The publication noted that building a factory in China would allow the U.S. car maker to avoid a 25% import levy, making its electric vehicles more competitive against luxury-brand rivals.

Shanghai Jinqiao Export Processing Zone Development, a publicly-traded unit of Jinqiao Group, said its controlling shareholder hasn’t signed any documents related to a joint venture for a Tesla factory.

For Tesla, a factory in China would be very important milestone. “This would be a major win for Tesla and Shanghai,” said Steve Man, an auto analyst at Bloomberg Intelligence. “The investment will probably include a nationwide dealership network, superchargers, R&D center and potentially a second Gigafactory.”

Tesla Expands Charging Network in China

Lack of charging infrastructure was the biggest roadblock for Tesla Motors Inc’s continued growth in China, the company’s largest and fastest growing market. As we reported earlier, car owners in China will no longer have to worry about charging infrastructure as the electric car maker is working to increase its charging infrastructure in the country. Currently, there are around 100 supercharging stations in China, with about 400 superchargers in total.

Robin Ren, the company’s vice president for the Asia-Pacific region, said that charging is now no more an issue for most of their drivers in China. “Today you can drive all the way from Harbin, a city in the north, to Shenzhen which is located in the southernmost part of China with a Tesla car by using our supercharging network,” he said.

The executive also said that the electric car maker is working closely with the utility companies on a plan that lets car owners install electric chargers at parking lots and homes.

Tesla Boosts Production

The company has started producing an unbelievable 2000 cars per week, a massively increase compared to 400 cars per week the company was producing in 2013. The company has an ambitious target to build and deliver 500,000 cars annually by 2018 and 1 million cars annually by 2020.

Many people believed that CEO Elon Musk was biting more than he could chew when he made those bold projections. However, latest news report indicates that the company is on the track to reach its ambitious targets. If the car maker maintains its 2,000 vehicles per week schedule, the firm should be able to deliver about 104,000 cars annually. Of course, it is reasonable to assume that the firm might even increase its output before the end of the year. Elon Musk has finally found a way to solve the production problems that has made his firm notorious for infamous delays.

Shares of Tesla Motors Inc  were up nearly 2% in pre-market hours. The stock has lost 8.46% year-to-date.

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